Momentum Trading

Discussion in 'Strategy Development' started by Anunakki, Nov 23, 2006.

  1. Ive been swing trading ( several days to several weeks) for years now . I know my technical analysis theory pretty well and Ive been fairly successful over the years...averaging close to 50% a year.

    Begining of summer I left my job to trade full time. I have a very substanial nest egg so Im trading with a good bit of cash.

    After a few weeks I realized that the easiest method is simply to check out the pre market gainers/losers and make sure there is corresonding volume of 100k+. I then check to make sure there is no overhead resistance.

    I give them a few minutes to find direction and then choose which ones seem to have the most potential and trade using the standard set of rules of higher highs/higher lows/increasing sell stops/MACD/STOCH/TRIN/TICK/MA oscillators.

    Now heres the thing. Ive been averaging 2% per day and with the amount of money Im trading with its really adding up fast. Im starting to get a bit nervous that theres some huge flaw in this VERY simple technique that is going to bite me hard.

    Of course I dont hold anything overnight and I never trade anything where my initial sell stop is more than 2% from my buy in..so theoretically risk is very limited.

    So..my question to those who are far more experienced ... is it really this easy ? Because Ive been making per month what I was expecting to make in 6 months. Or is 2% avg day standard ?

    Also..is the simple method I am using a standard picker that everyone uses ? It seems like a no brainer.

    J
     
  2. Dustin

    Dustin

    I use something similar to this near the open also and occasionally catch some good winners. When you enter are you scaling in, or just taking a position and setting a hard stop? I usually buy a small position then place bids scaled down hoping for a quick pullback, then a continuation. The problem with this is often the best trades I only have that first small position while it runs away from my bids. Would like to hear more details about your trade rules since i'm constantly tinkering with this type of trade.
     
  3. 2% per day is only for newbies on ET; for others 20%+. :D
     
  4. have a look at historical data during market downturns, methinks that a strategy like that would be good in a bull market(where practically everything goes up if it doesn't meet resistance) but will fail miserably during bears where falling prices are the norm.
     
  5. It seems to me that your trading individual stocks? IMHO we have been in a strong up move since 2002. (about 4 years now).

    My question would be, what happens if we go into a strong down market for the next 4 years? Can you trade your individual stocks in a "bear" market?

    I would be looking for a strategy that you can go both long and short! Read Trader28 strategy (Simple Profitable Method).

    I like being able to go both long or short. Good times, bad times, recessions, depressions, I don't care I just want to make money...

    Hope this helps you...

    snarlyjack
     
  6. Ive been thinking about how it would work during a bear market.. definately nowhere near as well because we wont be catching rides on the EFUT/ZVUE trains..lol

    Though finding the pre market percentage losers with corresponding volume should still bring in some good gains... as long as we have an uptick now and then !

    Ive been keeping up with Tim Knights bearish blog in case this rally ends ( personally Im in the middle as to if its near the end or not - though I do think a correction is in the cards quite soon ).

    Thanks for replying... so this is a very common method for stock selection then ?

    I prefer gap ups that pullback after 10-15 min to partially fill the gap. Then I take half my position as the uptrend begins and the other half if/when it breaks the opening high.

    If its one of those 'moonshot' stocks that gaps up and just keeps going I usually also wait for a pullback/consolidation. This means I miss out on a large part of the gain but it keeps me sane.

    I get stopped out a lot...more often than not..but Im not giving much up when it happens. So when I catch a ZVUE or EFUT it way more than makes up for a few 1% losses.

    Not to change the subject but because Im new at intrday trading Im wondering if historically this Friday is a good day to trade or if everyone takes it off and volume is negligable. What Im getting at is ZVUE made that all time high today and indicators seem to say its going to go up some more ( before it plummets back to $1.50 ...lol)

    J
     
  7. well....congrats...but we have had a pretty easy market direction wise since august first....especially in nasdaq/dow SnP.....You also have done well in picking which ship to sail with from the 3 or so pre-market choices.....but mm----will screw you on that strategy by taking out your 2% stops a lot....so your entry points must be pretty good...but it sounds like you could have some draw downs with that leverage if you are making 2% of your "nut" every day....maybe i mis-understood your trade sizes...but i have been there when you are making so much every day, week after week, and you start looking for trouble----"it can`t be this easy"....just keep doing it til it stops working is my take....i once made 26 straight winning option trades on long calls in a row.....i was dialed into that particular market.....sounds like you are in the zone....just stay alert.....as blow-ups----can lead to what i call "going on tilt" where you are just enough off your game....where adding a little bad luck and next thing you know you have 5 losing trade setups in a row----and then the market turns real nasty to predict.....like when ben first started on the job----giving the market mixed signals every 3 days--but if you have enough bank-roll----talent prevails in the end---i used to do that setup-----just moved on to other setups---just wanted to keep learning about the markets:)
     
  8. let your actual trade results decide how long you stay with thid dtrategy............
     
  9. Oh yeah..Im aware this markets been easy ..Im hoping it stays that way a while longer . I did trade through the early summer correction and with Tim Knights blog help did fine.

    Im assuming MM means market maker ? I traded X on its big run up day... I made money but the MM kept dipping to my stops..even though I was giving them a little wiggle room from actual support. Ive never had that happen on NASDQ.

    I tend to trade $100k lots. So when I say Im making 2% a day Im making $2000 a day ( averaged) even though on most days Im making mulitple trades...so you could arguably say Im making less than 2% a day.
     
  10. billp

    billp

    What can I say but well done.Keep using it until it doesnt work anymore.

     
    #10     Nov 23, 2006